Good morning! Welcome to The Morning Shift, your roundup of the auto news you crave, all in one place every weekday morning. Here are the important stories you need to know.
1st Gear: Geely’s Ambition
Last week, Li Shufu of Chinese car company Geely (which bought Volvo in 2010, and purchased a 51 percent stake in Lotus last year) continued a quest for domination by dropping $9 billion on nearly 10 percent of major German automaker Daimler, making him the Stuttgart-based automaker’s biggest shareholder.
Now Bloomberg reports that Geely also had its sights set on a “potential takeover” of Fiat Chrysler:
Li Shufu, the Chinese billionaire who controls Geely, approached FCA in the middle of last year as he was scouting for options to expand outside China, said the people, who asked not to be identified as the move wasn’t disclosed. Li opted not to make a formal offer as the two parties had different views on future valuations of Fiat Chrysler after the company’s five-year growth plan through 2018, they said.
Back in August, Automotive News reported that a number of Chinese car companies were interested in purchasing FCA amid government pressures to invest abroad, though Automotive News admitted it was “unclear which Chinese automaker or automakers [were] pursuing FCA.”
Then later that month, representatives from China’s biggest truck and SUV manufacturer Great Wall told Reuters that it was interested in acquiring FCA. More specifically, the company told Automotive News that it had its eyes on the Jeep brand.
So it seems both Geely and Great Wall have been thirsting over Fiat Chrysler, but no papers have been signed. Who knows if results would have been different back when Sergio was longing for consolidation. These days, though, he’s changed his tune, with Reuters quoting the CEO’s statements during a conference call earlier this year:
The necessity to find a partner, to try and guarantee our survival, going forward, is put to bed. I mean we’re done.
2nd Gear: Germany Wants To Avoid Diesel Bans
Germany’s highest court ruled this week that towns and cities are permitted to ban diesel cars to reduce air pollution. But Reuters reports that Barbara Hendricks, Germany’s environmental minister, made it clear that she wants to avoid such bans, telling journalists:
My goal is and remains that bans never need to be implemented because we can manage to clean the air through other means.
Those other means, Reuters reports, involve requiring automakers to develop solutions to clean up the exhaust of old cars, with Hendricks saying:
The problem was caused by carmakers and we should not release them from their responsibility.
German politicians and automobile executives were part of an emergency “Diesel Summit” last summer whose aim was to come up with ideas to convince cities not to impose such bans (diesel cars are German automakers’ “bread and butter,” after all), ultimately decided on software updates; incentives for owners to trade older cars for newer, cleaner ones; and additional funding for public transportation.
It appears that Germany will continue fighting against such bans, and Hendricks, who argued last summer that the real solution was to retrofit cars with hardware solutions, appears to continue pushing for that resolution.
3rd Gear: Rome Will Ban Diesels Starting In 2024 As Ancient Monuments Decay
While German politicians are fighting to avoid diesel bans in their country, other nations are already acting to keep oil-burners out of city centers. Reuters reports that the latest to join the club is Rome, with mayor Virginia Raggi writing on Facebook on Tuesday:
If we want to intervene seriously, we have to have the courage to adopt strong measures.
Reuters says about two-thirds of all new cars sold in Italy in 2017 were diesels, and that—since Rome itself isn’t home to any major factories—most of the city’s pollution stems from cars. This has been causing a number of issues, not just related to citizens’ health, but also related to the city’s ancient infrastructure, with Reuters writing:
Apart from health issues, pollution from combustion engines causes severe damage to Rome’s many ancient outdoor monuments.
According to a study last year by a branch of the culture ministry, 3,600 stone monuments and 60 bronze sculptures risk serious deterioration because of air pollution.
Diesels. They’re on their way out of cities around Europe.
4th Gear: GM Korea Isn’t Happy With The Interest It’s Paid The Mothership
Earlier this month, GM announced that it planned to shut down a major factory in Gunsan, South Korea, going on to say that the automaker was unhappy with the performance of Korean operations as a whole, and that drastic changes were ahead. This led to a protest among factory workers.
Now, Reuters reports that some South Korean officials are attributing GM’s high interest rates for GM Korea’s poor performance, writing:
South Korean officials and politicians blame GM’s high interest rates for exacerbating losses at GM Korea, which was already struggling with slumping exports to Europe.
“Board members asked for interest rate cuts at almost every meeting, but GM turned a deaf ear,” a GM Korea board member told Reuters.
“From a South Korean perspective, it is not right for the biggest shareholder to receive such a high interest rate when lending money to its affiliate,” said the board member, who declined to be named citing the confidentiality of the matter.
The story goes on, saying GM lent GM Korea $2.79 billion, with an interest rate of between 4.8 and 5.3 percent according to “GM Korea’s latest regulatory filing.” That filing says GM Korea has paid approximately $460 million in interest to GM over the past four years.
The story mentions that South Korean automaker Hyundai Motor borrowed money at interest rates closer to 2 percent, and that Ssangyong Motor paid 3.51 percent according to a lawmaker named Ji Sang-wuk.
A former board member of GM Korea whom Reuters says has “direct knowledge on the matter” defended GM:
A former GM Korea board member with direct knowledge of the matter said GM Korea’s board had asked KDB for loans with lower interest repayments but KDB also refused to lend to the loss making firm.
“GM couldn’t let GM Korea go bankrupt so it lent money with the same level interest rate that it charged other GM affiliates,” the source said.
“If this is going to be a blame game over GM taking high interest, this won’t help find a solution,” he added.
The drama continues as GM triers figuring out what to do with its Korean operations.
5th Gear: In An Effort To Revive Mitsubishi, Nissan Names Former FCA Exec As CEO Of North American Operations
Mitsubishi’s on the hunt for a 30 percent increase in sales and for an operating profit margin of 6 percent by late 2019. Part of achieving these goals will involve Fred Diaz, former President and CEO of Fiat Chrysler’s RAM brand, and subsequently a vice president of sales and marketing at Nissan.
Diaz has just been named the new president and CEO of Mitsubishi Motors North America, replacing Ryujiro Kobashi. Mitsubishi’s chief operating officer Trevor Mann described why Diaz is a good fit, saying:
The United States is a strategic market for Mitsubishi Motors in our Drive for Growth plan. With his in-depth background and experience in North America, Fred has a strong ability to proactively engage with Mitsubishi Motors’ dealers and customers as we aim to expand our dealership network, enhance our brand, and drive sales growth.
Automotive News calls this move “the latest step in the Renault Nissan Alliance’s plan to revive the small Japanese brand.”
He’s got a lot of work ahead of him if he wants to “revive” Mitsubishi in the U.S. Hopefully that work involves a Lancer Evolution.
Reverse: A Legendary America Race Car Driver Is Born
Neutral: Does It Make Any Sense To Ban A Technology?
If automakers can make clean diesels, then why ban them? Why not simply put limits on tailpipe emissions, and not limit how automakers can meet them?
Correction: That’s $460 million, not $460 billion that GM Korea allegedly paid in interest to the mothership over the past four years.